Hey this is tom nash, and i'm sure a lot of you, like me, forgot how a green even looks like now. Over the past week, everything went up starting from a firm coin based palantir every single stock you can think of was up, and the question is: is this for real or are we looking at a dead cat bound hey? This is tom nash, welcome back, and if this is your first time here well, you should know i used to be a financial analyst, a senior financial analyst. Now, i'm strictly on youtube, giving you financial information in a simple to understand language without any agendas just to objective fact. Now, as always on this video, i will ask you the same thing.

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Just click that link and everything else. You don't have to click ever again. Let's go back to the video we have to discuss this rally is this for real? Is this fake? What the hell is going on? The s p 500 did seven percent. In the past week i mean in a normal year the s p 500 does eight percent in the year i mean have we found the bottom hallelujah? Well, look, let me be honest with you, i mean inflation is bad.

Inflation is not good right now, but the thing is that inflation is not just some academic term that people just saying. Well, you know inflation is not good right now, pesky, inflation. The thing is that inflation actually does not so good things for your economy and your stock market. Essentially, what happens in inflationary times is that your cost as a business go up.

Your margins go down, people lose their jobs, there's a slowdown in spending an entire market. The economy goes to the toilet, and eventually this stock market gets that's how it works in every inflationary cycle and while you're getting kicked in the nuts by inflation. The federal reserve is coming right up behind you and kicking you in the butt, because in times of inflation, central banks, in our case the federal reserve increase rates on interest. Because what happens is they need to slow down inflation and they need to make capital more scarce and more expensive? That's how you slow down demand.

You basically crush it, but the problem is when you slow down, demand and crush it. It's like taking antibiotics when you take antibiotics, there's a lot of good cells in your body who get damaged. That's literally, what's happening. It also kicks the economy in the nuts and again, the stock market will suffer so right now.

What we're actually experiencing is the market going through an inflationary cycle with the fed actually kicking nuts as well. So the question is: are we done yet? Are we there yet? Is this the end of this horrible cycle, or is this a dead cat bounce and if you look at the stock market for the past week, it seems that mr market seems to think that it is. This is the end of the bad times and the beginning of the good times right, but the narrative here is very important why mr market thinks so well. There is a narrative here, that's being served now, you have to understand where the fear came from when the market went tumbling down, the fear came from high energy prices, high commodity prices, high inflation and expectations of elevated interest from the federal reserve.

We just talked about that, so what happened? Well, the narrative right now is that oil prices coming down down seven percent the past month. Commodity price is coming down, so the fed will not have to raise interest rates as much because you know what they say. Ebitda is earnings before important things and that important thing is interest and if you don't need higher rates and the stock market does not need to deal with companies paying more for their debt, let the good times roll on right now. Look.

You can really hear that. I'm being skeptical about this narrative but hold down the second, i want to clarify something. I absolutely have no idea where the market is going to go in the next two three four months. I don't know it might be going through a crazy bull run in the next few months.

I honestly don't know that's not the point of this video. The real question is where we headed long term 6 to 12 months, because if you think this narrative is correct, you have to assume a few things you have to assume. Inflation is going to get under control. Probably two three percent, normal inflation.

Will it happen? Next? Six to 12 months possible, but is it probable? I don't think so. It also means that energy prices have to come down significantly. Do we get 50 per barrel this year, or at least in the next year, with everything that's going on right now with opec, with the saudi stuff, with esg our own self-inflicted wounds on destroying our own capacity? Is it likely, probably not so much it's probable? I mean it can happen, but the probability i guess would be as much as somebody dating a kardashian and keeping their mba career intact. I mean it is possible.

We will see a two or three percent inflation and like a half a percent interest by this time. Next year, but with everything that's going on right now and the war in ukraine, i find it hard to believe and before you go and sell your portfolio, let me just explain: i do think that dollar cost averaging dca into the best companies. You can find fundamentally sound companies. This is the best strategy, long term we're talking five to ten years.

I'm not saying go ahead and sell your entire portfolio, i'm just saying be very selective and careful how you apply dollar cost average strategies, because the one thing you don't know is where we at on the chart we'll never know that. But if you think things cannot get worse well, go back and look at history how bad things can get over the past 100 years we had 28 bear markets, the average drawdown was 35. It lasted about 10 months right now, we're about six months into this. Bear market but we're not even in bear market territory, yet the s p 500 is down 18.

I mean we're not even there yet so we're probably halfway there. Just looking at the statistics. Of course you know stats don't mean deadly squad, but all i got to say is be careful now if you want to go and look for the past two crises we had, which is the dot-com bubble and the subprime mortgage crisis, whatever it's called right. Look at the numbers there they're even worse, 50-plus percent, drawdown on the s p, 500 and years to recover.

That was horrendous and just to explain what i'm talking about here. Finding bottom does not mean the market automatically starts to go up. Finding the bottom and the market going up is a whole different enchilada that might take years before these things actually materialize. So be careful because look i understand it.

I know i'm a human being too greed and fear drive markets short term. That's how the markets work but macroeconomics fundamentals. These are the things that determine the stock market performance long term, don't lose your focus. Keep your eyes on the ball.

Now. Look the bottom line here is quite simple: you know this rally is probably going to be a lot of fun, but you know it's like: going to summer camp you go to summer camp, you fall in love, you're, sure you're going to have beautiful babies together, get Married but then reality sets in as you go back home and your girlfriend lives in canada. You kind of understand well, this can't really happen, but it was a great time during the summer time right. This is the same thing.

This is a very risky time in the market. Now i wouldn't focus on making huge amounts of profits by betting on something that might happen. I would go for what's probable, not so what possible, and i would focus more on protecting the money i have rather than finding the next bonanza explosion, and in that case all you got to do is look at the market. Now look at this rally and just understand that this might be a hell of a dead cat bounce.

Now i'm not saying i know if it is, i'm not saying i don't know if it isn't, but i just urge you not to yolo your life savings into either of these options and just stay careful and calculated play defense right now, don't go all in on Either of these options without understanding the full ramifications now, as always, i hope you appreciate my contribution to the community and my help. If you do make sure you head to the description below and do two things number one check out, ftxus our sponsor number two check out our community. We actually have an amazing community on discord. We're having zoom calls it's five bucks per month to join.

If you want to support what we're doing here, check it out and as always a huge thank you from me to you i'll, see you in the next video.